Key Points
-
Netflix’s growth is slowing, and evidence suggests viewers are watching less.
-
Management has taken steps to right the ship, including a content leadership shake-up.
-
The company continues to generate solid revenue, profit, and cash flow growth, and the stock is attractively priced.
-
Last month was a tough one for Netflix (NASDAQ:NFLX) shareholders, as the stock tumbled 10.8%, according to data supplied by S&P Global Market Intelligence.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
For context, the benchmark S&P 500 edged lower, down 0.9% during the same period. However, the streaming pioneer fell far further as investors weighed Netflix’s latest results, a leadership shake-up, and fears of plateauing user engagement.
Changing the channel?
Netflix stock was already under pressure, as investors feared user engagement had hit a wall — and several takeaways from the company’s Q3 report seemed to add weight to those concerns. The streaming giant grew revenue by 12% year over year to $12.9 billion, driving earnings per share (EPS) up 47% to $0.87.
However, investors were less enthusiastic about Netflix’s outlook. For the fourth quarter, management is forecasting revenue of $13.4 billion, up 11.5% year over year, and EPS of $0.67, representing about 20% growth. This would mark the fourth consecutive quarter of decelerating revenue growth.
Netflix had previously said it expected its 2026 ad revenue to double from $1.5 billion to $3 billion. However, the company recently lowered its forecast, now expecting ad revenue of $2.7 billion. Management cited “delays in the rollout and partner integration of some of those new ad products.”
Perhaps more concerning were some of the streamer’s recent personnel actions. Late last month, Netflix announced plans to lay off roughly 1,000 employees — or 6% of its global workforce. This marks the largest slate of layoffs since 2022. The company followed that move with a shake-up among its content leadership, replacing its chief content officer and film chief.
The moves come as Netflix is suffering from waning viewer engagement. Despite expanding into podcasts and live sports to shake things up, viewers are logging into the streaming platform fewer times per month and spending less time there when they do, according to numerous reports. In July, Netflix reported that subscribers had watched 97 billion hours of content during the first six months of 2026, up just 2% year over year. That suggests existing viewers, while growing, are watching less.
The news isn’t all bad
While many investors have viewed the Netflix glass as half empty, there are plenty of reasons to be optimistic. Despite a downward revision, ad revenue is expected to grow by 80% in 2026, and its ad-supported tier is poised to launch in 15 new countries next year, which should provide a notable boost to its ad business. Furthermore, revenue and profits are still poised to grow in the double digits, and the company expects free cash flow to grow 19% this year to $12 billion.
One of the biggest question marks is whether Netflix will be able to field another hit show that gets viewers talking, along the lines of Stranger Things, Squid Game, or Wednesday. I would argue that, given the company’s track record, it’s a matter of “when,” not “if.”
Despite its consistent growth, Netflix is selling for less than 19 times earnings, a multiple not seen since 2022. There’s a lot of negativity priced into the stock, but its valuation offers astute investors the chance to buy the streaming pioneer at a discount.
For my money, Netflix stock is a buy.
Should you buy stock in Netflix right now?
Before you buy stock in Netflix, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $341,966!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,146,819!*
Now, it’s worth noting Stock Advisor’s total average return is 852% — a market-crushing outperformance compared to 203% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of November 10, 2026.
Danny Vena, CPA has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.
